Oil futures moved lower on Wednesday, pressured by an unexpected climb in U.S. crude supplies, the first in three weeks, as traders eyed the latest round of sanctions against Russia over its invasion of Ukraine.

Price action
  • West Texas Intermediate crude for May delivery
    CL.1,
    -3.81%

    CL00,
    -3.81%

    CLK22,
    -3.81%

    fell 28 cents, or 0.3%, to $101.68 a barrel on the New York Mercantile Exchange. Prices had been trading modestly higher of the U.S. government supply data.

  • June Brent crude
    BRN00,
    -3.47%

    BRNM22,
    -3.47%
    ,
    the global benchmark, was down 29 cents, or 0.2%, at $106.38 a barrel on ICE Futures Europe.

  • May gasoline
    RBK22,
    -2.64%

    was up 0.1% at $3.169 a gallon, while May heating oil
    HOK22,
    -3.04%

    lost nearly 0.1% to $3.467 a gallon.

  • May natural gas
    NGK22,
    +2.11%

    climbed by 5% to $6.331 per million British thermal units, poised for the highest front-month contract finish since December 2008, FactSet data show.

Market drivers

“Inventory data is not the primary focus now,” Tariq Zahir, managing member at Tyche Capital Advisors, told MarketWatch. “The biggest concern is Europe stops doing business with Russia . This could lead crude and natural gas to trade significantly higher.”

The U.S. on Wednesday unveiled new sanctions on Russia over its invasion of Ukraine, including a ban on all new investment in the country, and sanctions on Russia’s biggest financial institution and its largest private bank.

Other Group of Seven countries and the European Union were set Wednesday to announce new sanctions on Russia, after evidence of alleged war crimes emerged as Russian forces pulled back from the area around Kyiv. The EU, however, has held off on joining the U.S. and U.K. in banning Russian oil imports.

Still, EU officials have indicated that talk of a phaseout of Russian oil and natural gas was likely to increase.

“I think that measures on oil and even gas will also be needed sooner or later,” Charles Michel, president of the European Council, told the European Parliament on Wednesday.

The EU is “keeping this sharpest sword in its armory of sanctions in reserve for now,” said Carsten Fritsch, commodity analyst at Commerzbank.

“Whether it is drawn will depend in part on how swiftly the EU countries can reduce their dependence on Russian oil and gas. This will probably be easier in the case of oil,” he wrote. “What is more, banning oil imports would hit Russia considerably harder in terms of revenues than doing without natural gas. It is therefore likely that an oil embargo will come sooner than an import ban on natural gas.”

Top U.S. oil company executives will be in the spotlight Wednesday, appearing at a House hearing on gasoline price gouging.

Read: Why U.S. motorists suspect price gouging at the pump — and how much service stations actually profit from a gallon of gas

U.S. natural gas, meanwhile, was on track to settle at its highest since 2008, if it finishes the session above the $6.312 per million Btus settlement high from October.

“Headlines regarding a blast of cold weather hitting most of the eastern half of the U.S. this weekend, with temperatures expected to be colder than initially predicted, served as the bullish catalyst for the natural gas market’s rally this week as demand estimates rose considerably in response,” Tyler Richey, co-editor at Sevens Report Research, told MarketWatch.

“Geopolitical angst surrounding the Ukraine war, domestic inventories hovering well below the 5-year average, implied production expectations declining, and a lack of reinvestment by E&P companies to increase output” have also contributed to the bullish fundamental backdrop, he said.

Supply data

The Energy Information Administration reported on Wednesday that U.S. crude inventories rose by 2.4 million barrels for the week ended April 1. That followed declines in each of the previous two weeks.

On average, the EIA was expected to show crude inventories down by more than 1.85 million barrels, according to analysts surveyed by S&P Global Commodity Insights. The American Petroleum Institute reported late Tuesday that U.S. crude supplies rose by 1.1 million barrels last week.

The EIA reported a weekly inventory decline of 2 million barrels for gasoline, but distillate stockpiles edged up by 800,000 barrels. The analyst survey showed expectations for weekly supply declines of 350,000 barrels for gasoline and 700,000 barrels for distillates.

The EIA data showed crude stocks at the Cushing, Okla., Nymex delivery hub edged up by 1.7 million barrels for the week, but stocks in the Strategic Petroleum Reserve fell by 3.7 million to 564.6 million barrels last week.



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